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Using Analytics to Inform Your Planning Process

Some of the best theorizing comes after collecting data because then you become aware of another reality.”

– Robert J. Shiller, winner of the Nobel Prize in economics

In many organizations, annual planning entails senior leaders meeting to decide the initiatives for the year. They may be budget driven, they may be experience driven, and they may or may not be consensus driven.

The challenge is quite often that this approach isn’t driven by analytical insight. Consider:

  • It may fail to recognize declining markets or market share.
  • It may not be inclusive of numbers behind which products performed well or are failing to perform at all.
  • It may not recognize that the top three customers, for example, haven’t made purchases in six months—or that they have been lost to competitors.
  • It may not recognize that profitability is off for anchor clients, or that a warehouse is at full capacity.
  • Quite often, planning processes aren’t structured to recognize the interdependencies or the lack of capacity of an organization to take on additional project work above and beyond normal day-to-day operations.

Planning without data behind internal operations, performance and external factors tends to be uninformed planning. Some data that should be used to inform planning includes:

  • Work force productivity and capacity
  • Product line (or service line) profitability and revenue growth (or decline)
  • Property, plant and equipment capacity and productivity
  • Client base growth, decline or concentration
  • Client profitability
  • Firm share of wallet (i.e., what percent of spend is the client gaining from its clients)
  • Marketplace expansion or contraction
  • Total marketplace opportunity
  • New product entrants
  • Competition concentration (i.e., how many competitors and what share of market do they have)

Data is key—and when it comes to business growth planning, it needs to be used throughout the process to enable the best decision making. Planning seeks to focus limited time, effort and resources on the best opportunities, so using data analytics to identify and focus on the best opportunities is critical.

Likewise, have you benchmarked your company’s performance against that of your competitors? If so, how do you stack up? Is your growth and profitability in line with them, or if not, what’s the gap? If your business’ revenue benchmarks below competitors, is it because your competitors are lower priced, higher quality, better at executing sales—or is there another reason? And what should you do about it?

Planning sessions often start when executives gather in a room and ask the big question: What do we want to accomplish next year? At Skoda Minotti, we believe meetings like this should be preceded by a diagnostic analysis of key performance indicators from the current and previous years, along with competitive benchmark data and other meaningful metrics. The goals in all this: Determine the best places to focus your efforts for the greatest return in 2018.

Getting Started

The first area to focus on is a review of the current and previous years to assess areas of concern and to formulate key objectives for the upcoming year. This is followed by pulling selected data and conducting preliminary analyses on key areas of the business and the market.

Once the requisite analyses have been performed, numbers have been crunched, pie charts have been crafted, qualitative factors have been identified, and you and your team now have reports in hand. What’s next?

At this point, your team should convene for an open and honest review of the information and data that has been gathered—both quantitative and qualitative. This includes:

  • Internal factors such as firm growth and profitability, product and service offering profitability, resource productivity and efficiency, organizational strengths and weaknesses
  • External factors such as customer growth and profitability, competitive positioning (i.e., what are your competitors doing to differentiate themselves), entrance of new competitors, new products and services, customer shifts, opportunities and threats

Remember: Before you can plan for 2018, you need to understand how your business performed in 2017 (and to some extent, recent prior years as well). Accordingly, your team’s discussion of the internal and external factors listed above should ultimately lead to a consensus regarding current business performance relative to your competitors.

From there, you’ll have a baseline of knowledge to begin planning for 2018. Some questions you’ll need to ask include:

  • What are our objectives, and what results do we seek for each of those?
  • How do we prioritize the realization of those objectives?
  • What are the actions / initiatives needed to achieve those results?
  • Who will be responsible for achieving those results, and when?
  • How do we test these initiatives without investing massive amounts of resources on something that may or may not work out?

Understanding the Role of Outside Consultants in Business Growth Planning

The traditional business planning scenario involves the convergence of an executive team for a half-, full-day or even multi-day session, usually led by the company owner, president or other executive. Typically, an agenda is prepared and work begins once the meeting starts.

However, the best results are realized when the real work occurs prior to the start of the meeting. In these situations, critical areas of business performance are analyzed up front and then shared with the leadership team before the first meeting even begins. This allows for a more focused and effective discussion as the business performance is reviewed and discussed.

In the preparation of this analytical material, the development of the agenda and the facilitation of the meeting, an outside consultant can bring significant expertise to this work. Knowing where to focus time, resources and attention during sessions, understanding how and when to release tension as discussions elevate, and channeling the focus of the group onto critical issues are just some of the distinct advantages that an outside consultant offers in the growth planning process.

Conversely, using the company president or other executive to develop, prepare and facilitate can actually hinder the process. Doing so minimizes that executive’s role as a participant and diminishes that voice in the process. Oftentimes, when the president is speaking, dissenting opinions are lost.

Business consultants offer a distinct advantage in this regard. A consultant with deep experience leading and managing corporate planning and transformation has the depth of knowledge, methodologies and outside resources necessary to conduct thorough quantitative and qualitative research up front – before the executive team ever meets – and then present their findings to the executive team, and help them determine priorities based on information collected.

When it comes down to mining really good company and market-specific data, many small to midsize businesses just don’t have the expertise, time and resources necessary to get the job done.

  • How have your products and services performed in current and recent years?
  • Which products are profitable, and which aren’t?
  • What are your competitors doing?
  • Who are your most profitable clients or customers?
  • How much more profitability can you derive from them in 2018?
  • Where are the bottlenecks that limit growth?

For these and other questions, qualified business consultants often prove to be a business’ secret weapon in devising and deploying winning growth plans.

Whatever questions are meaningful for your business, and whatever answers you and your team arrive at, the final product should be the plan—a clearly articulated set of initiatives with responsibilities, timing and results that can be measured and reported on.

Your business growth strategy is fundamentally about competing better, serving clients and customers better, and winning more business—all elements of growth. Analytics, combined with thoughtful review of qualitative factors and insights, provide a solid basis of understanding that, when leveraged properly, can help to guide priorities and tactics for the coming year.

Do you have questions about business growth planning, or other business advisory issues? Please contact David Mustin, MBA, at 440-449-6800 or dmustin@skodaminotti.com.

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